The Bull in the Long Run
Bullish Economic News in the Short Term
A Stock with Great Growth-Stock Returns
Because I am a musical person at heart, when I look at how the three major U.S. stock market indexes are doing, I can sometimes hear a children's song in my head. You know the one. You start singing, "Oh, the cow goes ..." And then your kid bellows "Moo!" Then you sing, "and the duck goes ..." And the tyke responds "Quack!" And so on. And then at the end, when you've run through every barnyard animal you can think of, (plus the koala bear, who says nothing and a few made up animals), you end it all with "... and that's the way it goes!"
Great song, guaranteed to please the most discerning juvenile audience.
So I'm singing in my head "Oh, the Dow goes ..." And I see the weekly chart, which, right now, looks like this.
Then my head sings "and the S&P 500 goes ..." and there's the chart
And finally "and the Nasdaq goes ..." and this chart shows up.
Now, to stop being silly, the one thing about all three of these charts that stands out like soup on a necktie is that all three of the major indexes are going up, and have been at least since the tail end of 2012.
Yes, there have been corrections, some of them quite substantial. And the last couple of days haven't been pleasant. But the long-term trend of the market is up. And right now, the intermediate-term trend is also up. Add to the positive message of the major indexes these facts:
* Tuesday's report that European consumer confidence hit an eight-year high in March, indicating that the long-awaited recovery in the eurozone is actually happening.
* The return of U.S. unemployment statistics to a level that many economists consider full employment. (Yes, I know there are many discouraged workers out there who aren't counted. But as demand for labor grows, many of those workers will return to the labor force. And wages will also rise as employers once again have to compete for good workers.)
* Investors in Chinese stocks that trade on U.S. exchanges have staged a five-day rally that is longer and stronger than any such rally since October.
* Many large, liquid stocks with great stories are making huge moves on excellent volume.
So the only conclusion you can reach is that U.S. stocks are in a long-term uptrend.
And the big question that follows that conclusion is: Are you investing in the growth market?
As I've written many times in the past, the single most valuable asset for a growth investor is a bull market. Bull phases shift the odds in favor of investors; they won't cure all ills, but they put the wind at your back and the current in the direction you're swimming.
If you're a growth investor and you've been making money in the market, congratulations!
But if you're either a growth investor who hasn't been making money or a reluctant investor who hasn't been putting money to work, I have a request.
Will you try one of Cabot's growth advisories-Cabot Market Letter, Cabot China & Emerging Markets Report or Cabot Top Ten Trader-and see if we can help you take advantage of this remarkably long-lived bull market? We can help you find the stocks to buy, advise you at what price to buy and where to put your defensive stops, and even give specific instructions on what to do when corrections occur.
We've been at the growth game for more than 44 years, and we'd love to help you.
For my stock pick today, I looked around for a stock that has been performing well since the end of 2012, just like the broad market. And I found one in United Therapeutics (UTHR). UTHR went through a major correction in 2014, but over the long run has delivered great growth-stock returns.
Here's how the company and the stock chart were described in the March 16 issue of Cabot Top Ten Trader. You can see that Top Ten gets to the bottom of a stock's appeal and gives you all the information you need to make an informed investment decision.
Why the Strength
United Therapeutics is no stranger to Top Ten, with 12 previous appearances, most recently in January 2015. The pharmaceutical industry has been producing lots of leaders in recent months, and United's story is among the best. The company's new treatment for high blood pressure, Orenitram, which was approved for sale in late 2013, made a huge contribution to the company's January rally. And this month the good news is that United's cancer drug, Unituxin, gained FDA approval for use against a very specific kind of cancer in children, and that the EU's drug administration is reviewing it for the same indication. The company's Remodulin treatment for pulmonary arterial hypertension remains its lead product.
United Therapeutics hasn't depended on quarterly results to drive investor interest. The 41% jump in earnings in the company's Q3 report last October had little effect on its stock. And the Q4 report on February 24 (12% EPS growth on 20% revenue growth) also had almost no impact. Like many pharmaceuticals and biopharmas, the interest in United Therapeutics is driven by the progress of drugs in clinical trials and approvals by the FDA. United's stock was flatter than a pancake from late September 2014 through early January. But the renewed interest investors are showing is a continuation of a long trend that dates back to 2012. A record of delivering on new products doesn't guarantee future results, but it's a pretty good indicator that the company can deliver.
UTHR spent 15 weeks (from September 24 to January 7) trading very flat under resistance at 136. But the rally that started on January 8 at 127 has now topped 170, including today's 6% jump. Today's leap up has left the stock's 25-day moving average far behind at 157, so a pullback is likely at some point. A buy on a correction of at least a couple of points would lower the risk. And using a stop just below 160 will reduce it a bit more.
Chief Analyst, Cabot China & Emerging Markets Report
And Editor of Cabot Wealth Advisory
P.S. Now is the Time to Stay off the Sidelines
Despite the most recent selling in the market, the overall trend remains positive. In Cabot Top Ten Trader, we feature a wide array of stocks and sectors you can benefit from in as little as 30 days. Our most recent issue features a diverse mix of strong stocks, including the market's top retail stock that have the opportunity to bring you double-digit returns in the weeks to come.